US must stop obsessing over fake ‘China threat’ narrative and focus on global economic dangers

The US needs to work towards preventing financial Armageddon and realise that China is not seeking to become a global hegemon
Washington should come to terms with a new, multipolar and multicivilisational world, and resume its role as an agent for growth and peace

Regina Ip

Published: 1:00am, 9 Oct 2022

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World financial markets are facing their worst turmoil since the 2008 financial crisis. The Federal Reserve’s belated then aggressive action in raising interest rates to fight US inflation has sent shock waves through financial markets. The strong dollar, war in Ukraine, energy crisis and China’s economic slowdown constitute the ingredients of what World Bank chief David Malpass warned of as a “perfect storm”, putting the world at risk of stagflation.

Markets are watching to see which way the Fed would pivot should mayhem in the global economy spread to the United States. In a recent Fortune magazine interview, former US Treasury secretary Larry Summers suggested the Fed funds rate needed to rise to 5-5.5 per cent to wring over-the-top demand out of the system. If such resolute use of the interest rate instrument to tame inflation materialises, America and the rest of the world would face a very painful correction.

The US, as the world’s largest economy with the strongest reserve currency, should be focusing on how to help the world head off financial Armageddon. Yet it continues to be consumed with national security and great power competition, in particular the “China threat”, the only issue on which politicians from the Democratic and Republican parties appear to unite.

The Biden administration has not only continued Donald Trump’s “America first” policy, but gone further in identifying China as “the most serious long-term challenge to the international order”. In his May 26 speech laying out America’s approach to China, Secretary of State Antony Blinken said: “China is the only country with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to do it.”

In accordance with its “invest, align, compete” strategy to counter China, the Biden administration has maintained most of Trump’s tariffs on Chinese imports, prohibited hi-tech exports to China, enacted a Chips Act to boost semiconductor investment while forcing allies to relocate chip production to the US, and ratcheted up its rhetoric to “defend” Taiwan.

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The question of whether the China threat really exists must be critically examined.

Those who truly understand China know it is no threat. America’s vision of a China threat, in place of the Cold-War-era Soviet threat, is a reflection of its hegemonic instincts and an insecurity over the possible weakening of its global dominance.

As international relations scholar and long-time China observer Josef Gregory Mahoney pointed out, China exhibits political and cultural “exceptionalism”. Unlike the US, it does not seek global hegemony. Its sufferings at the hands of colonial powers since the mid-19th century have seared strong anti-hegemonic instincts into its national psyche.

Despite the visibility of its gleaming coastal cities, China’s per capita gross domestic product, at roughly US$12,000, pales in comparison with that of the US, at about US$69,000. China cares deeply about its regional disparities in economic development and works hard to improve its people’s livelihoods and safety, and to repair damage to its environment.

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Mahoney uses “aloofness” to describe China; this is well chosen. The Middle Kingdom has a long history of closing its doors to foreigners. As a vast, continental-size country, China has long believed in self-sufficiency. It has engaged in short-term border conflicts but never indulged in colonialism or the occupation of foreign territories.

Despite its adoption of a socialist system with Chinese characteristics, the Confucian tradition remains strongly embedded in Chinese culture and society. Whereas Western culture privileges the sanctity of individual rights and freedoms, the Sinic civilisation, as identified by Samuel Huntington, privileges hierarchy, order, collectivism, self-discipline and even self-sacrifice.

Trade and economic engagement with the West are fine, but Western norms and lifestyles are regarded in some quarters as toxically hedonistic and potentially detrimental to maintaining the cultural purity and strength of Sinic civilisation.

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China’s political system is unique to its historical, social and cultural roots. China believes deeply in improving the well-being of its people. But China does not believe in democracy as defined solely on one procedural aspect – popular participation by way of ballot box elections on a wide franchise.

China has taken pains to develop sociopolitical and economic systems appropriate to its unique history and circumstances. Unlike the US, China does not seek to export its political system. Its people-based but Communist-Party-centred system is understandably viewed by many accustomed to pluralistic, universal-suffrage-based elections as too eccentric to follow, even unacceptable.

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With the expansion of its economic footprint as the world’s largest trading entity and second-largest economy, China understandably wishes to seek a place at the top tables in the international community, and expand its military presence to protect its overseas assets and investments. It seeks technological advancement and upgrading of its military capabilities for self-defence and the continuous improvement of the livelihoods of its people.

What China seeks in international relations is mutual understanding and respect, with long-term dialogue and peaceful negotiations as means to resolve conflicts, and globalisation and multilateralism to produce win-win outcomes for all. Decoupling is bad for the global economy. Anti-market moves, such as the forcible dismantling of the global supply chain, are bound to create massive inefficiencies.

America is a great country blessed with abundant natural resources and talented people, and in the past, has helped many to grow. It should come to terms with a new, multipolar and multicivilisational world, and resume its role as an agent for growth and peace.

Regina Ip Lau Suk-yee is convenor of the Executive Council, a lawmaker and chairwoman of the New People’s Party